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What is Central Sales Tax (CST)?

Central Sales Tax CST

What is Central Sales Tax (CST)?

Central Sales Tax or CST is imposed on sale or purchase of goods occurring the the course of inter-state trade or commerce. Value Added Tax (VAT) is applicable on purchase or sale of goods within a state, whereas CST is levied on interstate purchase or sale of goods.

Note: The VAT regime has ended and GST is applicable in India from 1st July 2017.

When CST is applicable?

CST is applicable when there is inter-state sale or purchase of goods including work contract. Newspapers are exempt from CST. However, mere transfer of goods to a branch or another unit of the same entity would not attract CST. CST applicable only when there is sale or purchase. For a sale or purchase to have occurred under CST regulations, there must be transfer of document of title to the goods during the movement of goods from one state to another.

CST Payment

CST tax is collected and retained by the State from where the transfer or sale takes place. Hence CST payment would be due monthly or quarterly and varies from state to state.

CST – Form C

Under CST regulations, tax liability on inter-state sales is 2% or the rate of tax for sale within State, whichever is lower, provided the sale is effected between a registered dealer and a registered purchasing dealer.

CST Rate of 2% can be claimed if:

  • Sale is made by a registered dealer and goods sold are covered in the registration certificate of the buying dealer.

Hence, concessional rate of tax is applicable if selling dealer provides proof that purchasing dealer is eligible to get these goods at concessional rate. Form C is thus evidence provided by buying dealer to the selling dealer to avail concessional CST tax rate of 2%.